Charter Medical Corp.'s prepackaged bankruptcy filing yesterday came as no surprise, but lifted the company's bond prices between 1/4 and 3/4 point, traders said.
"It's gone as expected," Brian Bogart, a high-yield analyst at Duff & Phelps/MCM Investment Research Co., said of Charter's Chapter 11 filing.
The company could emerge from bankruptcy by late September, he said.
Another analyst observed, "It looks like it should be a streamlined process."
One trader said the Macon, Ga.-based hospital operator's 14% senior subordinated debentures showed the biggest gain, adding 3/4 point to reach 70 3/4 toward the end of the day.
Steven L. Patricola, a vice president at BT Securities Corp., said Charter's bonds have recorded little movement in the past several weeks because, "this information was widely disseminated."
Since March, however, when analysts and others began digesting the company's plan, the 14s have added 10 to 12 points; the 14 1/4s subordinated debentures have picked up one or two; and the 15.85% junior subordinated debentures have added two or three points, Mr. Patricola said.
Charter's reorganization plan, filed in U.S. Bankruptcy Court in Delaware, only applies to Charter Medical Corp., the parent holding company, a Charter Medical press release says. It excludes any hospitals or subsidiaries, the release notes.
According to company spokesman Andrew Brimmer, Charter Medical first announced its plan to restructure in January 1991. Last October, the company said it had reached agreement in principal with its bank group and the steering committees representing its bondholders for a prepackaged reorganization plan, Mr. Brimmer said.
Between April 29 and May 29, the company solicited consents from its creditors on its plan. Last Monday, Charter said it had obtained the necessary approvals from its bank lenders and security holders, he said.
Of 10 lender classes, all but three voted 100% in favor of the plan, he said. A bankruptcy judge has scheduled a confirmation hearing for July 8, 1992, Mr. Brimmer said.
If the court confirms the plan, all of Charter's security holders must abide. The plan would reduce Charter's long-term debt by about $700 million and cut annual interest payments by over half, to about $ 100 million.
Under the plan, holders of three classes of the company's outstanding subordinated debentures will receive $200 million of new 7 1/2% debentures due 2003 and 93% of the company's stock, which will trade on the American Stock Exchange under the symbol CMD.
Senior discount note holders would receive new senior secured notes with a principal amount equaling the accreted amount of their notes as of June 30, 1991 with an initial interest rate of 11.05% increasing to 11.70% on July 1, 1994; 12.025% on July 1, 1995; and 12.35% on July 1, 1996.
Holders of Charter's Series A preferred stock would receive 1% of the outstanding common stock and warrants for 0.4% of the common stock on a fully diluted basis.
The remaining preferred holders and holders of Charter's common stock, which include the company's employee stock ownership plan, would get the remaining 6% of the outstanding common stock. Additionally, company management will get options for 12% of the common.
Upon completion of the restructuring, the principal amount of the company's bank debt would remain unchanged, the release says. It will consist of a term loan facility maturing on Sept. 30, 1997 and an ESOP facility maturing Sept. 30, 1995.
The term loan facility will bear an initial interest rate of prime, growing to prime plus 1% by July 1, 1996. The ESOP facility will have an interest rate of 855 of the term loan facility, or, at the holder's option, 8.375%.
In other news, General Motors Acceptance Corp. yesterday announced it would redeem all of its outstanding 8 7/8% debentures due June 1, 1999 on July 1. GMAC will redeem the debentures at 100.85% of their principal amount plus accrued interest, according to a GMAC release. All $250 million principal amount of the debentures originally sold in June 1974 remain outstanding.
In secondary trading yesterday, the high-yield market ended firm in quiet trading, while high-grades maintained spreads with Treasuries.
Morgan Guaranty Trust Co. NY issued $500 million of 4.35% bank notes due 1993. The noncallable notes were priced at various prices. Both Moody's and Standard & Poor's rate the offering triple-A. Morgan, Stanley & Co. managed the offering.
Federal Farm Credit Banks issued $150 million on floating rate medium-term notes due 1993 at par. The noncallable notes float daily at 262.5 basis points under prime and pay quarterly. Lehman Brothers managed the offering.
Cinemark USA Inc. issued $125 million of 12% senior notes due 2002 at par. The bonds are callable at 106 after five years, moving to par in 2000. Moody's rates the offering B1, while Standard & Poor's rates it B-plus. Bear, Stearns & Co. managed the offering.
Alaska Airlines issued $97.35 million of 9.5% equipment trust certificates. The series A through D certificates have average lives of 12.5 years, 12.6 years, 12.9 years, and 14.3 years, respectively. They were priced at par to yield a spread of 210 basis points over 10-year Treasuries. Moody's Investigators Service rates the offering Baa3, while Standard & Poor's Corp. rates it BBB-minus. Merrill Lynch & Co. managed the offering.
Standard & Poor's has given a AA rating to Argonaut Intercompany Pool's claims-paying ability.
"The rating is based on the company's very strong capital base, healthy earnings, and conservative investment portfolio," a Standard & Poor's release says. "Argonaut's ability to profitably underwrite and manage complex workers compensation risk has enabled it to generate its strong earnings and capital base."